Module 4
Reading the contracts: the clauses that move in a deal
A diligence reviewer is not reading contracts to understand the business. The reviewer is reading them for the few clauses whose effect changes when the company is sold: the ones that let the other party leave, demand a price change or block the buyer’s plans. These clauses are well known, and a list of ten covers most of what turns up. That makes it possible to scan a whole set of contracts for them quickly, using search terms, and then to read in full the contracts that the scan flags. Scanning is not reading: a scan finds words, not meaning, and it will miss a clause written in unusual language and flag one that says the opposite of what the word suggests. This module teaches the ten clauses, why a share deal and an asset deal treat them differently, how to use a scan as a way of ordering your reading, and the limits of a scan. The Deal Clause Scanner applies a set of search rules to invented contracts, so that you can see what a scan finds and what it misses.
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See what is included in All-Access →General education on legal due diligence, using invented companies, contracts, people and figures. It states common practice in simplified form and does not describe any one country's law, which differs and changes; rules on disclosure, the effect of a buyer's knowledge, privilege, data protection, competition law and liability in particular vary. It is not legal advice, and it does not replace advice from a qualified lawyer on a real transaction.
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